Updated on July 18, 2023
The acquisition of immovable property by a resident or by a foreigner is governed by different rules and legislations. The purchase of immovable property by a foreigner comes under the purview of FERA. Given here is a detailed understanding of the same.
The Foreign Exchange Regulation Act (FERA) of 1973 is a legislative act designed to regulate various financial transactions involving foreign exchange, securities, the import and export of currency, and the acquisition of immovable property by foreigners. Specifically, Section 31 (1) of FERA mandates that foreign corporations, not incorporated in India, must obtain permission from the Reserve Bank of India (RBI) before they can acquire, hold, transfer, or dispose of any immovable property in India, except through leasing for a period not exceeding five years.
This provision establishes a legal requirement for foreign corporations to seek authorization from the RBI for any dealings related to immovable property in India. The permission is necessary to ensure proper oversight and control over such transactions and to safeguard the interests of the Indian economy and its real estate sector.
By enforcing this provision, FERA aims to monitor and regulate the acquisition and transfer of immovable property by foreign entities in India. The RBI acts as the governing authority responsible for granting permission and overseeing compliance with the regulations. This regulatory framework helps maintain transparency, prevent illicit activities, and protect the domestic real estate market from potential speculative or manipulative practices.
Foreign corporations intending to engage in immovable property transactions in India are required to adhere to this provision and obtain the necessary authorization from the RBI. The permission granted by the RBI establishes a legal basis for foreign corporations to engage in the acquisition, holding, transfer, or disposal of immovable property within the specified parameters defined by the law.